Suppliers’ innovation strategies in CE countries

Publication Type:

Conference Paper


Attila Havas


Structuring new automotive industries, restructuring old automotive industries and the new geopolitics of the global automotive sector, Krakow (2012)


sectoral and national innovation systems; international production and innovation networks; types of innovation; types and sources of knowledge for innovation; industry-academia co-operation


 It is practically impossible to delineate the boundaries of automotive industry and give an indication of its economic significance using readily available statistics. As a very wide range of products are used to assemble a motor vehicle – practically all industrial sectors supply the automotive industry –, data collected by statistical offices are usually too narrow in terms of coverage. In other words, quite a few automotive suppliers are classified as leather, rubber, plastics, paint, glass, cable or metal producing and processing companies, foundries, electrical and electronics companies, etc. In spite of these limitations, it can be safely stated that automotive industry, and especially automotive suppliers, play an important role in the four Central European countries analysed in the paper, namely in Austria, Hungary, Poland, and Slovenia.

The paper relies on statistical analyses (using business statistics and data stemming from various rounds of the Community Innovation Survey), firm-level interviews, as well as secondary sources. The main findings can be summarised as follows. New products are usually brought in by parent firms in three countries, with some exceptions. The obvious one is when formalised R&D activities are conducted in these “home” countries, too, leading to product innovations. Another source of product innovations is reverse engineering, e.g. in the case of spare parts sold on the aftermarket. Incremental innovations are also important from an economic point of view, although these are less spectacular. In these cases the idea might come either from the users, requesting improved performance or from the engineers of a supplier to reduce production costs, energy consumption and environmental burden or enhance product characteristics. For some of this latter type of modification, the entire production process has to be redesigned, and purchasing new equipment, as well as introducing new measurement and test methods are necessary, too. In the fourth country, that is, Austria, however, there are large, R&D intensive firms, too, besides SMEs characterised by considerably lower level of RTDI activities. In that context, a policy driven 'greening' of the car industry – collaborating with the energy sector and also receiving regional public funding – has given impetus to automotive firms’ innovation activities. Further, large automotive firms are also very active in R&D co-operations with domestic and foreign universities and other research organisations. Both EU FP projects and national STI policy support schemes are important funding sources for these co-operation activities.
In general, production processes are designed by the subsidiaries, assisted to some extent by the parent firm or the suppliers of machinery. In most cases, subsequent process innovations are stemming from local knowledge and experience. Also, it is quite often the case that products brought in by the parent firms need to be modified for more efficient manufacturing, i.e. the sources of these minor product innovations are the subsidiaries. A frequent form of process innovation is the introduction of manufacturing cells, usually designed by the local engineers, trained by the parent firm, and assisted by general principles applied across the various subsidiaries of the group.
As for organisational innovations, there might be some assistance provided by the parent firms in the form of internal manuals, guidelines and good practices, but local solutions are also encouraged. For example, so-called cross-functional teams have been introduced by an interviewed firm, composed of middle-managers responsible for purchasing, manufacturing, logistics, and quality assurance. These teams are usually co-ordinated by a sales manager, who is representing the firm vis-à-vis the client in all matters, responsible for obtaining and keeping orders, maintaining smooth co-operation with the buyer and inside the firms among the various units, and thus a profitable operation. For indigenous firms, the main sources of organisational innovations are their own ideas and/ or external advisors.
Marketing innovations might be of economic relevance, too, in particular for suppliers specialising in the aftermarket. One such firm in our sample has established direct contacts with its major buyers (e.g. public transport service providers), and thus replaced wholesale companies.
In sum, automotive firms are in fierce competition with their counterparts (assemblers – assemblers; T1 – T1 suppliers; etc.), and thus there are strong incentives to be innovative, i.e. to introduce new products, processes, organisational solutions, management and marketing methods. Moreover, several T1 suppliers, when assess their T2 suppliers’ performance include innovation capabilities among the set of evaluation criteria. Our interviews have confirmed the crucial importance of co-operation among subsidiaries of large MNCs, and that of international production networks (in case of independent suppliers). Besides, local knowledge and experience are also important sources of the various types of innovations (technological and non-technological) observed. From a different angle, beyond formalised R&D activities, many other types of knowledge are needed to underpin successful innovations.

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